Key Risks for the Global Economy in 2025

11th December 2024

As we approach 2025, the global economy faces a myriad of risks that (FreightWaves, 2024; EY, 2024). The implications of these tariffs may
could significantly impact businesses and markets worldwide. These extend beyond immediate economic impacts, affecting long-term trade
risks are shaped by geopolitical tensions, economic policies, technolog- relationships and cooperation.
ical advancements, and environmental challenges. This essay outlines
twelve key risks for 2025, providing insights into their implications and
the necessary preparations for businesses and policymakers. 3. INFLATIONARY PRESSURES
Summary of Key Risks Inflation is projected to remain a significant concern in 2025, driven by
supply chain disruptions, rising commodity prices, and increased con-
◌ Geopolitical Tensions: Ongoing conflicts and rivalries, particularly sumer demand. Central banks may face challenges in balancing infla-
between the U.S. and China, could disrupt trade and investment. tion control with economic growth, leading to potential interest rate
hikes. Higher borrowing costs could dampen consumer spending and
◌ Protectionist Policies: The incoming Trump administration’s antic-
business investment, impacting overall economic growth (International
ipated tariffs may lead to increased trade barriers and retaliatory
Monetary Fund, 2024; OECD, 2024). Businesses must prepare for the
measures.
possibility of fluctuating prices and adjust their strategies accordingly.
◌ Inflationary Pressures: Persistent inflation could challenge eco-
nomic stability and consumer purchasing power.
4. SUPPLY CHAIN DISRUPTIONS
◌ Supply Chain Disruptions: Continued supply chain challenges may
hinder production and increase costs. Supply chain disruptions are expected to persist into 2025, exacerbat-
ed by geopolitical tensions and the lingering effects of the COVID-19
◌ Cybersecurity Threats: The rise in digital reliance exposes busi- pandemic. Companies may struggle with delays and increased costs,
nesses to significant cybersecurity risks. impacting their ability to meet consumer demand. Diversifying supply
◌ Labor Market Challenges: Skills shortages and changing work- chains and investing in local production may become essential strate-
force dynamics could impact productivity and growth. gies for resilience (Seyfarth Shaw LLP, 2024; World Trade Organization,
2024). Businesses that fail to adapt may face significant challenges in
◌ Climate Change Impacts: Extreme weather events and regulatory maintaining competitiveness.
changes related to climate could disrupt industries.
◌ Financial Market Volatility: Economic uncertainties may lead to
increased volatility in financial markets. 5. CYBERSECURITY THREATS
◌ Technological Disruption: The rapid advancement of AI and auto- As businesses increasingly rely on digital infrastructure, the risk of cy-
mation could displace jobs and alter market dynamics. berattacks grows. In 2025, the potential for significant data breaches
and ransomware attacks could disrupt operations and lead to sub-
◌ Regulatory Changes: Stricter regulations in various sectors may stantial financial losses. Companies must invest in robust cybersecuri-
require businesses to adapt quickly. ty measures to mitigate these risks and protect sensitive information
(Baldwin, 2024; Krugman, 2024). The increasing sophistication of cyber
◌ Emerging Market Vulnerabilities: Economic instability in emerging
threats necessitates a proactive approach to cybersecurity.
markets could pose risks to global financial systems.
◌ Public Health Risks: The potential for new health crises could dis-
rupt economic activity and strain resources. 6. LABOR MARKET CHALLENGES
The labor market is likely to face challenges in 2025, including skills
shortages and changing workforce dynamics. As industries evolve, the
1. GEOPOLITICAL TENSIONS demand for skilled labor will increase, potentially leading to wage in-
Geopolitical tensions, particularly between the United States and China, flation. Companies may need to invest in training and development to
are expected to escalate in 2025. The rivalry over trade, technology, attract and retain talent in a competitive labor market (European Com-
and military influence could lead to increased tariffs and trade barriers, mission, 2024; Financial Times, 2024). Failure to address these challeng-
disrupting global supply chains and economic stability. The potential for es could hinder productivity and growth.
conflict over Taiwan and other territorial disputes adds to the uncer-
tainty, as nations may be forced to choose sides, further complicating
international relations (Bown, 2024; Holland & Knight, 2024). 7. CLIMATE CHANGE IMPACTS
Climate change poses a significant risk to the global economy, with
potential disruptions to agriculture, infrastructure, and public health.
2. PROTECTIONIST POLICIES Extreme weather events and shifting climate patterns could lead to
The incoming Trump administration is anticipated to implement signif- food shortages and increased costs for businesses. Companies must
icant protectionist policies, including tariffs on imports from Canada, prioritize sustainability and resilience to mitigate these risks (OECD,
China and Mexico. These measures aim to bolster domestic manufactur- 2024; World Trade Organization, 2024). The transition to a low-carbon
ing but could lead to retaliatory tariffs from affected countries, exacer- economy may also require significant investments and adaptations.
bating trade tensions. The potential for a trade war could disrupt global
supply chains and increase costs for consumers and businesses alike

Disclaimer:
This white paper is intended for informational purposes only and does not necessarily represent the views of the directors, board, or all members of the International Trade Council. The analysis and
recommendations provided herein are based on information available up to October 2023 and are subject to change. Readers are advised to consult professional advisors before making any decisions
based on this information.

ITC Website: www.tradecouncil.org info@tradecouncil.org

Supply Chain News: www.supplychainreport.org The International Trade Council
Business Confidence Survey: www.businessconfidence.org TheInternationalTradeCouncil
ADAMftd Global Trade Data: www.adamftd.com @inttradecouncil An international, peak-body, chamber of commerce
8. FINANCIAL MARKET VOLATILITY REFERENCES
Financial markets are expected to remain volatile in 2025, influenced by ◌ Baldwin, R. (2024). The Great Convergence: Information Technolo-
geopolitical tensions, inflation concerns, and central bank policies. Inves- gy and the New Globalization. Harvard University Press.
tors may react to changing economic conditions, leading to fluctuations
in stock prices and increased uncertainty. Businesses should prepare for ◌ Bown, C. P. (2024). The WTO and the Rise of Protectionism: A Glob-
potential impacts on capital access and investment strategies (Interna- al Perspective. Peterson Institute for International Economics.
tional Monetary Fund, 2024; EY, 2024). Understanding market dynamics ◌ European Commission. (2024). Trade Policy Review: EU Member
will be crucial for navigating this volatility. States and Protectionism. Retrieved from European Commission.
◌ EY. (2024). Global Trade and Economic Outlook: Risks and Opportu-
9. TECHNOLOGICAL DISRUPTION nities for 2025. Retrieved from EY.

The rapid advancement of artificial intelligence (AI) and automation ◌ Financial Times. (2024). The Rise of Economic Nationalism: Implica-
presents both opportunities and risks. While these technologies can en- tions for Global Trade. Retrieved from Financial Times.
hance productivity and efficiency, they may also displace jobs and alter ◌ FreightWaves. (2024). The Impact of U.S. Tariffs on Global Supply
market dynamics. In 2025, businesses must navigate the challenges of Chains. Retrieved from FreightWaves.
integrating AI while addressing potential workforce disruptions (Bald-
win, 2024; Krugman, 2024). Companies that fail to adapt may struggle ◌ International Monetary Fund. (2024). Global Economic Outlook:
to remain competitive in an increasingly automated landscape. The Effects of Protectionism.

10. REGULATORY CHANGES

Anticipated regulatory changes, particularly in the technology and fi-
nance sectors, could pose risks for businesses. Stricter regulations on
data privacy, antitrust issues, and environmental standards may require
companies to adapt quickly to remain compliant. Failure to navigate
these changes could result in legal challenges and reputational damage
(European Commission, 2024; Financial Times, 2024). Businesses must
stay informed about regulatory developments to mitigate potential
risks.

11. EMERGING MARKET VULNERABILITIES

Emerging markets may face heightened vulnerabilities in 2025, partic-
ularly as global interest rates rise. Countries with high levels of debt
may struggle to service their obligations, leading to potential defaults
and economic instability. Investors should be cautious when considering
exposure to emerging markets amid these risks (International Monetary
Fund, 2024; World Trade Organization, 2024). The interconnectedness
of global markets means that instability in emerging economies could
have ripple effects worldwide.

12. PUBLIC HEALTH RISKS

The ongoing threat of public health crises, such as pandemics, remains
a critical risk for the global economy. In 2025, the potential for new out-
breaks could disrupt economic activity and strain healthcare systems.
Businesses must develop contingency plans to address potential dis-
ruptions and ensure employee safety (Seyfarth Shaw LLP, 2024; OECD,
2024). The lessons learned from the COVID-19 pandemic will be essential
in preparing for future health crises.

SUMMARY
The global economy in 2025 will be shaped by a complex interplay of
risks, including geopolitical tensions, protectionist policies, inflationary
pressures, and climate change impacts. Businesses and policymakers
must remain vigilant and adaptable to navigate these challenges ef-
fectively. By understanding and preparing for these risks, stakeholders
can better position themselves for success in an uncertain economic
landscape.

ITC Website: www.tradecouncil.org info@tradecouncil.org

Supply Chain News: www.supplychainreport.org The International Trade Council
Business Confidence Survey: www.businessconfidence.org TheInternationalTradeCouncil
ADAMftd Global Trade Data: www.adamftd.com @inttradecouncil An international, peak-body, chamber of commerce